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PBR - $83.55 - Petroleo Brasileiro

Petrobras has dropped -$13 since early August and is approaching initial support at $82. -$9 of that drop was over the last three days. The drop was due mostly to the fall in oil prices but there was additional concerns due to the Bolivian nationalization. PBR assets in Bolivia are being nationalized along with everyone else and the date for final negotiations is rapidly approaching. Petrobras is expected to suffer somewhat from the asset grab but Bolivia still needs PBR to continue to explore and build out infrastructure. They will continue to make money in Bolivia but substantially less. Fortunately Petrobras is a very active explorer in both shallow and deep water and has large reserves that will remain safe from seizure by Chavez and Morales.

I am adding a January put while the strike is well below the current level. The price is reasonable and we should get past any remaining Q3 declines. $70 is strong support.

Insurance Put:
Buy January $70 PBR-MN currently $1.80

Company Info:

Petroleo Brasileiro S.A. - Petrobras (Petrobras) is a mixed-capital enterprise of which a majority of voting capital must be owned by the Brazilian Government. The Company is engaged in a range of oil and gas activities, which include segments such as exploration and production, refining, transportation and marketing and distribution. The Company operates 95 platforms for production (72 fixed and 23 floating), 16 refineries, 30.318 kilometers of pipeline and 6,154 filling stations spread across the national territory. In addition, to its position in Brazil, Petrobras is present in 15 countries, such as Angola, Argentina, Bolivia, Chile, Colombia, Ecuador, the United States, Iran, Mexico, Nigeria, Paraguay, Peru, Tanzania, Uruguay and Venezuela. It also operates backup support of offices in New York, Tokyo, China and Singapore.

Petrobras has decent support at $85 and again at $80. I would like to see $80 again but we will monitor any drop for a hint of rebound. Try not to catch the knife.

Breakdown target: $85 hit 9/08
Position: 2009 $100 LEAP Call VDW-AT @ $14.90

Insurance put:
9/11 January $70 PBR-MN currently $1.80


 

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